European markets surge as Dow passes 17,000

A positive response to the forecast beating US jobs data has pushed markets sharply higher, with the Dow Jones Industrial Average breaking through 17,000 for the first time, writes Nick Fletcher. And with suggestions the strong non-farm payrolls number could bring forward a US rate rise from the Federal Reserve, the dollar has also strengthened. Markets continue to be supported not only by the recent spate of reasonable economic data but also the continuing benefits or central bank stimulus measures (a US rate rise notwithstanding). So the final scores showed:

• The FTSE 100 finished 48.84 points or 0.72% better at 6865.21

• Germany's Dax jumped 1.19% to 10,029.43

• France's Cac climbed 1.02% to 4489.88

• Italy's FTSE MIB added 0.95% to 21,884.60

• Spain's Ibex ended 0.67% higher at 11,090.0

In the US the Dow is holding on to its gains, up 0.49% at 17,058.73.

And on that upbeat note, it's time to close up for the evening. Thanks for all your comments, and we'll be back again tomorrow.

Back on the ECB, and Marc Ostwald of Monument Securities suspects Mario Draghi has been playing tricks by announcing the plan to release the accounts of its meetings:

The fact that the biggest "news" from the ECB press conference is the switch to a 6 week cycle of meetings and the confirmation that meeting minutes will be published (both as of January 2015), certainly goes with the idea of this having been a "non-event" of a meeting.

Indeed, one might suggest that this was a distracting tactic, given that both decisions were in principle agreed a long time ago, and because the ECB council knew that it had little else to offer, in terms of still missing details to the measures announced last month.

Clearly Draghi and his fellow council members were more than acutely aware that the absence of further details on the June measures, on the AQR results, and their clear determination to avoid having to field too many 'probing' questions on the parameters of the outlook for conventional policy measures, left them needing a 'distractor' announcement such as this.

Ostwald is also struck by the irony of Mario Draghi criticising markets for obsessing over every piece of detail, while also promising them extra infomation:

With 8 meetings per annum and an additional 8 meeting minutes release dates, the fact is that there will in principle be more rather less "event risk" surrounding ECB policy, at least from the perspective of financial markets.

The strong US jobs report probably won't provoke a change in policy at the Federal Reserve, but might encourage "a change in the rhetoric" around future monetary policy soon..

So argues Larry Elliott, our economics editor. Here's a flavour of his take:

Janet Yellen, the Fed's chairman, seems relaxed enough with the way things are. She has expressed a willingness to leave policy on hold, with a gradual tapering away of the asset-purchase programme and no increase in interest rates until there is either a fall in the unemployment rate below 6% or there is an obvious acceleration in wage growth.

After describing signs of growing inflationary pressure as "noise", Yellen will no doubt be comforted by the latest data from the Department for Labor in Washington showing wages were up 2% in the year to June, slightly down on the 2.1% increase recorded in May.

That, though, is a bit misleading since the fall in the annual rate of earnings growth has more to do with what was happening last year than what is happening this. A bounceback in wage growth is highly likely in July.

Which means Wall Street is going to remain jittery about US inflation rates over the summer...

Breaking: US non-farm payrolls jump by 288,000

US non-farm payrolls rose by 288,000 in June, much sharper than expected. Economists polled by Reuters were expecting a 212,000 rise.

The figure for May was also revised up to 224,000 from an earlier estimate of 217,000.

Meanwhile the unemployment rate dropped to 6.1%, which is the lowest rate since September 2008, the same month that US investment bank Lehman Brothers collapsed. Economists had expected the jobless rate to remain unchanged at 6.3%.

Many investors have been waiting for stronger evidence that the world’s largest economy is in good shape and today certainly does that. This will allow the Federal Reserve to continue in its tapering and even prepare the ground for raising rates next year.

Dennis de Jong, managing director at UFXMarkets:

This is the fifth successive month the reading has risen above 200,000 with job growth significantly rebounding this quarter following a poor start to the year.

The third quarter officially opened yesterday ahead of Independence Day celebrations. Positive news has been sparse of late and this is as good an excuse as any to enjoy this weekend’s fireworks.

Rob Carnell, chief economist, ING Global:

Without a clear step up in wages, and whilst the unemployment rate remains 6-something percent, we suspect the Fed will be loathe to change its formal stance with respect to the taper, or to the possibility of normalising rates.

The time is soon coming that the FOMC will have to change its tack with respect to its policy stance, and forward guidance. Today’s release takes us a little closer to that point, but as FOMC chair Yellen’s recent testimony shows, they are not there yet.

Of course, the number of jobs created isn't the only thing that matters. The unemployment rate could trickle down from 6.3% to 6.2%.

But a lot of economists will be looking at the earnings data, for signs that US wages are creeping up. That would add to inflationary pressure in the US economy, a key factor in how the Federal Reserve normalises monetary policy.

"I will propose to the government today that we require SDH to stop all privatisation processes until a new government is in place."

SDH is the government body handling the privatisation of around 15 state-controlled companies. These asset sales are part of Slovenia's strategy to clean up its banking sector and avoid a bailout.

They are also unpopular with the Slovenian public, so Bratusek may be looking to drum up support ahead of the election. The vote was called after Bratusek lost the leadership of her party, amid unhappiness with her austerity programme.

Even a temporary pause in the sell-off process is likely to push down the amount of money that Slovenia can raise, according to Primoz Cencelj, a fixed-income portfolio manager at investment firm KD Skladi (via Reuters).

Foreign exchange traders are also suggesting that the first UK interest rate rise could come in four months time

Jake Trask, corporate dealer at UKForex, explains:

An interesting note in the service sector report concerned the plummeting rate of unemployment: currently sitting at 6.6%, it expects the rate to possibly dip below 6% by the end of the year, adding to the argument for an interest rate rise in time for November’s Inflation Report.

With MPC members becoming more and more hawkish in tone recently, this is still a distinct possibility.”

And the reports of wage growth suggests that the spare capacity in the economy is being used up.

Wood says:

Booming employment strengthens the case for a November rate hike.

The PMIs signal that further very rapid falls in unemployment are in prospect, which will put pressure on the BoE to hike rates earlier than they may have been planning on a few months ago. We expect the first rate hike in November this year.

Services firms reported a record increase in payrolls in June, while manufacturers said jobs numbers increased the most in 39 months. The tightening labour market is feeding through to better wage growth according to the PMIs. Services firms reported stronger pay growth, while construction firms recorded rapid input cost inflation.

David Noble, CEO of the Chartered Institute of Purchasing & Supply, says today's report shows there was a "hiring spree" in the UK service sector last month, as new business poured in:

As levels of activity surged higher, along with strong customer demand and favourable market conditions, job creation accelerated to a record survey high in June.

With optimism increasing and momentum continuing to build, there is no evidence to suggest that the speed in the recovery is about to slow down anytime soon.

Photograph: Markit

But despite the jump in employment, firms also reported an increased backlog of work....and a rise in wages.

Noble explains:

Reflecting these shortages in staffing levels, wages increased during this month, pushing running costs up. Services companies have been, however, only able to pass on a limited proportion of these higher costs to clients.

Overall in June, the UK services sector, alongside strong performances from manufacturing and construction, has cemented expectations that the economic recovery can power ahead into the second half of the year.”

UK service sector hires staff at 'unprecented' pace

Britain's service sector has recorded another month of strong growth, with firms taking on new staff at a record rate and pushing up wages.

Data firm Markit's monthly survey of the sector showed that activity within Britain's dominant sector continued to rise in June.

With new business hitting its highest level this year, firms hired more staff at an "unprecedented" rate. And there are encouraging signs that workers are managing to squeeze pay rises out of their bosses.

As Markit explains:

A by-product of the tightening service sector labour market was reports of increased wages.

The headline service sector PMI did fall a little, to 57.7 from 58.6 in May. But that still shows a healthy rise in activity (any reading over 50=growth).

And with new business volumes at a six month high, business confidence remained strong.

UK service sector PMI, June 2014 Photograph: /Markit

Chris Williamson, Chief Economist at Markit, says the UK economy continued to "boom" in June:

"Alongside an ongoing surge in construction and the largest quarterly rise in manufacturing output for 20 years, the services PMI confirms that the economy is firing on all cylinders. We expect the economy to grow by 0.8% again in the second quarter, taking GDP to a new all-time high.

“A renewed upturn in growth of new orders across all three sectors suggests that the economy should also pick up speed again as we move into the second half of the year.

“At first glance, June’s PMI survey results make grim reading and raise worries that the euro area’s recovery is already fading. Output growth slowed for a second successive month, to the weakest since December. Growth in the region’s main engine, Germany, is fading, while France has entered another downturn.

“Dig a little deeper, however, and there are grounds for optimism. We should not lose sight of the fact that, even with the slowdown, the June data round off the best quarter for three years. We should expect economic growth to strengthen from the 0.2% rise seen in the first quarter to perhaps 0.4% in the second quarter.

“With new orders rising at the fastest rate for three years, the pace of economic growth should also pick up again as we move into the second half of the year."

French service sector shrinks again

But there's more gloom for France -- activity in its service sector activity has fallen for the second month running.

Its service sector PMI slipped to a four-month low of 48.2, down from 49.1 in May, which means a sharper contraction (any reading below 50 shows a fall in activity)

French firms reported that outstanding business fell, leading firms to cut staff for the eighth month running.

French service PMI, June 2014 Photograph: /Markit

This follows a weak manufacturing PMI report earlier this week. Put together, it indicates that the French private sector is struggling.

Duncan Head, the Markit economist who compiled the report comments:

“The French service sector disappointed during June, contracting for the second month in a row. Companies pointed to lacklustre demand as the primary cause of the sustained fall in new business. In response, firms shed staff for the eighth month in sequence.

To add to the concern, strong competitive pressures continued to weigh on companies’ pricing power while input cost inflation continued to grow, placing greater constraints on firms’ operating margins. As was the case last month, there appears to be limited evidence of an up- turn in the French economy after the poor GDP figures from earlier in the year.”

Governor Stefan Ingves and First Deputy Governor Kerstin af Jochnick entered a reservation against the decision to cut the repo rate to 0.25 and against the repo-rate path in the Monetary Policy Report.

They advocated cutting the repo rate by 0.25 percentage points to 0.5 per cent and a repo-rate path in which the repo rate remains at 0.5 per cent until 2016 and is slowly raised thereafter.

Spanish service sector keeps growing

The first major European service sector report is out -- and it shows that Spain's service companies continued to grow in June, but at a slower pace.

The Spanish service sector PMI came in at 54.8 in June, down from 55.7 in May. That means the sector has grown for the last eight months, helping to pull the economy out of recession.

However, this is the weakest rise in activity in three months.

Spanish service sector PMI, June 2014 Photograph: /Markit

On the jobs front, companies increased their staffing levels during June. Employment rose for the third month running, although the rate of job creation remained only modest, Markit (which compiled the report) said.

Greek citizens face the prospect of power cuts today, as workers at the country's Public Power Corporation begin a series of rolling blackouts.

They're protesting against the government's plans to sell off PPC, as part of its bailout programme. A bill to partly privatise the company is being debated in parliament today.

The unions are planning to put different areas of Greece offline at different times, rather than pulling all the switches at once.

Union chief Giorgos Adamidis told the Kathimerini newspaper:

“There is no danger of a blackout,”

“We are going on strike at all of PPC’s production units and mines from Komotini to Arcadia but nobody said that all the plants would go off line at the same time. The action will be staggered because nobody wants the country to be plunged into darkness.”

Waiting for Mario Draghi and non-farm payroll

The new European Central Bank headquarters, under construction in Frankfurt. Photograph: DANIEL ROLAND/AFP/Getty Images

Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.

There's a bumper crop of economic data heading down the slipway today.

The monthly US unemployment payroll report, always a big event for the markets, has been hauled forward from tomorrow because of the Fourth of July holiday.

Economists will be looking to see whether American firms kept hiring staff at a steady rate last month; a strong increase in the payroll will suggest the US economy recovered from its 'deep freeze' contraction last winter.

Conversely, a weak number will raise fears that the recovery isn't as strong as hoped, and could cause ructions in the markets.

We're not expecting any changes in monetary policy today, given the stimulus measures taken a month ago, but you can't rule out a few fireworks from "Super Mario".

We also get fresh information on the health of the European economy, with the monthly PMI reports for the service sector. Analysts fear that France's service sector will have suffered a fall in activity, while Germany, Spain and Italy should all have grown.

Later today will see EU services PMIs, ECB, NFP, ISM non-manf all ahead of a US holiday tomorrow....

And in the corporate world, Poundland are reporting that profits have jumped by a quarter, while cinema chain Cineworld is blaming the World Cup for a dip in admissions in the last few weeks (more on those shortly).